Crash Course in Dis­e­qui­lib­rium Eco­nom­ics

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This is a set of 5 lec­tures that I deliv­ered last week in Quito, Ecuador, at FLACSO–the Latin Amer­i­can Fac­ulty of Social Sci­ences. In future years I hope to expand this into two com­plete courses–one on the his­tory and devel­op­ment of eco­nom­ics from a dis­e­qui­lib­rium per­spec­tive, and the other on dynamic mon­e­tary mod­el­ing in eco­nom­ics using Min­sky, the Open Source sys­tem dynam­ics pro­gram that I have devel­oped with the help of a grant from INET.

Lecture One: Why economics must be a disequilibrium discipline

In other dis­ci­plines, I would use the word “dynamic” in place of dis­e­qui­lib­rium (and more strictly still, evo­lu­tion­ary, as Veblen argued so long ago). But in eco­nom­ics the con­cept of equi­lib­rium has become so embed­ded that the con­trast­ing approach I and many oth­ers have championed–thus far with­out mov­ing the main­stream one iota–is best described as dis­e­qui­lib­rium eco­nom­ics.

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Lecture 2: The founding fathers of disequilibrium economics

I cover Marx, Schum­peter, Fisher, Keynes, Kaleckii and Min­sky, Good­win as dis­e­qui­lib­rium econ­o­mists. In a longer course, I will include many others–including Roy Har­rod and Janos Kor­nai.

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Lecture Three: Minsky’s Financial Instability Hypothesis

Minsky’s hypoth­e­sis brings these threads of dis­e­qui­l­brium analy­sis together, with direct influ­ences from Marx, Schum­peter, Fisher, Kalecki, and Keynes–and in that order.

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Lecture Four: Modeling Minsky’s Financial Instability Hypothesis

I built my first model of Minsky’s hypoth­e­sis by extend­ing Richard Goodwin’s 1967 Growth Cycle. This lec­ture out­lines both Goodwin’s method, its ori­gins in Marx’s dynamic model from Chap­ter 25 of Vol­ume 1 of Cap­i­tal, and how its com­plex behav­ior yielded an unex­pected but pre­scient result of a “Great Mod­er­a­tion” pre­ced­ing an eco­nomic break­down

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Lecture Five: Endogenous Money and Instability

All dis­e­qui­lib­rium the­o­rists (except Richard Good­win) have empha­sized the piv­otal role of bank­ing and money in dis­e­qui­lib­rium think­ing, while in Neo­clas­si­cal equi­lib­rium analy­sis, banks and money (and most of the time, debt) play no role in macro­eco­nom­ics.

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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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